Digital currencies continue to present advanced opportunities in the global financial industry. Despite the countless advantages they bring, cryptocurrencies are prone to drastic price changes which usually occur for various reasons.
Recent data shows that the overall market cap of virtual assets is decreasing from 2.3T to 1.6T. The data captures and displays these price changes from December 25, 2021, to January 25, 2022. Stock markets are also facing a similar situation after experiencing a massive selloff in January 2022. The market crisis event comes after an announcement from the Feds, saying that they would review and adjust various policies.
Such events are causing losses in the global market even as investors pursue other ways to put their money to work. That way, everyone can remain confident with their investments and further encourage more participation from other users. Some of the mechanisms include:
A buyback procedure involves repurchasing a certain number of digital tokens from the overall supply. Crypto projects undertake this process by buying the assets from liquidity pools or the community.
As such, platforms employ the buyback mechanism to adjust the demand and supply dynamics of their native tokens. Burning also helps maintain the value of digital tokens by permanently removing them from circulation.
Thus, virtual assets get lost once they appear in the burn address. Lowering the supply ensures the cryptocurrency's value goes through manageable price changes.
A digital token's utility plays a major role in maintaining its value. Crypto assets initially began to operate as payment instruments where users spend their holdings to acquire different goods and services. However, the use-cases are evolving to meet other objectives on blockchain-based platforms.
Some projects use digital tokens for governance purposes, giving holders the power to make crucial decisions concerning the project.
Lending is another use-case where investors can earn interest rates by lending their fiat/digital currencies. Enabling multiple utilities on one asset allows it to grow and maintain a stable value.
The blockchain network requires active participation from the community. Today, anyone can take part in verifying transactions on a public ledger. In return, most platforms offer lucrative rewards for overseeing such activities.
Providing these rewards gives investors an incentive to work on fulfilling the services. More users will join the investment platform to generate adequate incomes in the long run.
Here, crypto projects can tie their assets to another valuable item. In most scenarios, platforms back their digital assets with gold, a precious metal with a high potential of generating revenue.
A gold ETF functions as a fund that is backed by one major asset: gold. Investors who acquire gold ETFs do not necessarily own the precious metal. Instead, it provides investors with an overview of the commodity's market performance. Similar to other regular stocks, gold ETFs are traceable across various exchanges.
The digital currency space is home to different types of gold-tied crypto assets. Examples include:
Zambesi Gold (Pty) represents a mining entity that handles the development and attainment of mining assets. The platform successfully achieves its objectives from real gold and real mining operations.
Leading the team is Koos Van Straaten, a mining expert with 40 years of experience in the mining industry. Zambesi Gold also hosts other team members with several skills like resource management, product/ social media marketing, and sales consulting.
According to the project, most gold-backed digital assets fall because they cannot build any commercial value. High debt and overhead costs are other factors that may lead to a failing mining house.
Zambesi hopes to address these problems by transforming mining assets into fully backed digital assets. Hence, the project can run as a bullish gold-backed digital currency with less severe volatility.
Paxos Gold (PAXG) works as a virtual currency asset tied to gold. PAXG is based on the Ethereum blockchain, with Paxos posing as the asset's main gold reserve. Every PAXG holder can redeem their assets for an ounce of the gold held by Paxos.
Furthermore, the token uses approximately 0.02% fees for minting and eliminating PAXG assets from the overall supply. Paxos Gold began its operations in 2012, with Rich Teo and Charles Cascarilla as the initial founders.
PAXG is currently trading at $1,808 and ranks as the 183rd digital asset in the market.
Tether Gold (XAUT) is yet another gold-backed digital asset from Tether. The currency holds its gold through a swiss vault and enables users to redeem their tokens for gold or cash. It currently maximizes Ethereum and Tron blockchains for various actions.
Therefore, XAUT holders can trade their holdings as an ERC-20 token and a TRC-20 token. At press time, the digital asset is going for $1,798.
Third on the list is Digix Gold, which offers DGX holders one gram of gold for each token. Digix Gold holds its precious metals in Singapore and Canada, with the Bullion Association working as the vault insurer.
Here, investors attract a minimum fee of 1% for exchanging the tokens for gold. Moreover, users create DGX tokens when they acquire gold through the Digix Gold Marketplace.
Meld Gold represents an Australian startup that works in conjunction with Algorand to establish a gold-backed token.
The platform's goal hopes to bring an ecosystem where investors can trade digital tokens and physical gold.
Entities like Zambesi Gold build an ecosystem where investors can benefit from a gold-backed digital asset. They also contain mining acquisition documents that show the overview, geology, and location of different mining fields. Enforcing legal compliance allows Zambesi to offer its services following the set policies.
More importantly, the platform's native token increases its value over time as the price of gold rises. Cryptocurrencies are known to be unstable digital assets that change values within the shortest time possible.
Applying different mechanisms such as the burning procedure helps blockchain-based projects maintain their assets' values.